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India, China To Contribute More Than Half Of Global Growth In 2023: IMF
As global headwinds have eased and food and oil prices have fallen, Asia is expected to grow at 4.7 per cent in 2023 and 4.5 per cent in 2024, according to the report
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Due to fading supply-chain disruptions and a surge in the service sector, India and China will account for more than half of global growth in the coming year, according to the International Monetary Fund (IMF) in a blog post published on Monday.
Asia will be a major driver of global growth, with countries other than China and India contributing another 25 per cent.
“As pandemic supply-chain disruptions fade and the service sector booms,” the report said. “Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam are all back to their robust pre-pandemic growth,” the report added.
According to the report, inflation in India is expected to moderate in the coming year.
“There are now signs that headline inflation peaked in the second half of last year, though core inflation has been more persistent and has yet to decline definitively. We anticipate that inflation will return to central bank targets sometime next year, as financial and commodity headwinds ease,” according to the IMF.
However, central banks throughout the region must remain “vigilant” because core inflation remains high, and the re-opening of China's economy may cause inflation to rise due to increased demand.
“This means that central banks must tread carefully in reaffirming their commitment to price stability,” the report said.
On 8 February, the Reserve Bank of India (RBI) raised its key interest rate, the repo rate, by 25 basis points to 6.25 per cent. Despite a cumulative increase of 250 basis points over the last year, inflation in January was 6.52 per cent, which was higher than the RBI's upper tolerance limit of 6 per cent.
According to the IMF, central banks may be forced to raise interest rates even further.
“Indeed, they may need to raise rates further if core inflation does not show clear signs of returning to target,” the IMF added.
However, as global headwinds have eased and food and oil prices have fallen, Asia is expected to grow at 4.7 per cent in 2023 and 4.5 per cent in 2024, according to the report. The region grew by 3.8 per cent in 2022.